Could the ‘outstanding’ 2 per cent deposit scheme break the poverty trap?

This scheme, called the Family Home Guarantee, will see single parents enter the housing market with just a 2 per cent deposit. The remaining 18 per cent of the home loan deposit, needed to avoid lender’s mortgage insurance (LMI), will be guaranteed by the federal government.

Family Home Guarantee will be available to up to 10,000 single parents with dependants from 1 July 2021 and for the next four years.

The scheme will be based on income, with eligible single parents required to earn under $125,000 to tap into a government-backed mortgage.

According to the host of The Smart Property Investment show, Phillip Tarrant, the government becoming a stakeholder in property will create security for families.

“In many ways, it can potentially break a generational poverty trap for many Australians,” he said.

“So, if you’re able to get into property, particularly in this market and hold on, what’s the net result? Well, it goes up in value, that means you’re creating wealth, and that’s wealth that can be passed down through to generations. I think it’s a smart business.”

Mr Waters agreed, calling the surprising budget announcement an “outstanding” policy.

“I think there’s going to be such a payback in dividends for the next generation, should this work well,” he said.

“Safety, security for those right now, which will just, once again, pay dividends for the next generation.”

Runaway housing prices causing concerns

Despite giving single parents a leg up, soaring house prices across the country means families will have a few options to purchase appropriate family-friendly homes.

Working similarly to the First Home Loan Deposit Scheme, the government has set caps on how much a property can be valued at: Sydney, $700,000; Melbourne, $600,000; and Brisbane, $475,000.

According to economist Dr Andrew Wilson, the current median asking price for a two-bedroom unit in Sydney is $615,000, with a three-bedroom at $820,000.

In Melbourne, the two-bedroom unit median is $520,000, with three-bedroom unit median asking prices at $585,000. For Brisbane, the two-bedroom unit median is $400,000, with three-bedroom unit median asking prices at $560,000.

“By comparison, the median asking price for a Sydney house is currently $1,297,077, with Melbourne at $869,490 and Brisbane $568,992, and all clearly still rising strongly,” Dr Wilson concluded.